Fed Hikes Rates 25 Basis Points to 3.75%-4%, First Increase Since 2023

MacroDigital Finance Impact 4
โดย Zacks Investment Research·US·Read original
Summary · why it matters

The Federal Reserve raised its benchmark interest rate by 25 basis points under Chair Kevin Warsh, lifting the federal funds rate target range to 3.75%-4% in a unanimous decision that marked its first rate increase since 2023 and a reversal after three consecutive cuts had lowered the range to 3.5%-3.75% by December 2025. Fed officials weighed the risk that inflation could stay high for longer, driven by rising fuel prices from the Iran war and ongoing effects of tariffs, especially since the job market was still strong, and the Fed also lowered its unemployment-rate projection to 4.1%, with another rate increase possible before year-end. President Trump strongly criticized the decision, arguing U.S. interest rates should be 1% or lower because of the country's strong credit standing and accelerating investment activity, while the S&P 500, Dow Jones Industrial Average and Nasdaq all declined in yesterday's trading session. Insurers appear broadly well-positioned to benefit from the shift, with life and annuity insurers likely to gain the most as higher rates let them reinvest maturing bonds and deploy new premium inflows at more attractive yields, while property and casualty insurers face a more mixed impact because energy-related inflation and tariffs could raise automobile repair, construction and medical costs. Reinsurance Group of America and Lincoln National could gain from significant exposure to spread-based annuity products and long-duration bond portfolios, while Travelers' large investment portfolio could provide a more modest boost to investment income.

Impact on stocks 5

Financials▲ · 2 stocks
Lincoln National Corporation
LNC
▲ PositiveMonetaryrelevance

Higher rates let Lincoln National reinvest maturing bonds and new annuity premium inflows at more attractive yields, boosting spread-based annuity income.

Reinsurance Group of America
RGA
▲ PositiveMonetaryrelevance

Reinsurance Group of America's significant spread-based annuity exposure and long-duration bond portfolio benefit from reinvesting at higher yields after the Fed hike.

Climate Adaptation & Water▲ · 1 stocks
The Travelers Companies Inc
TRV
▲ PositiveMonetaryrelevance

Travelers' large investment portfolio could see a modest boost to investment income from higher rates, though P&C faces mixed cost pressure from energy inflation and tariffs.

Others▲ · 2 stocks
％Effective Federal Funds Rate
EFFR
▲ PositiveMonetaryrelevance

The Fed raised the federal funds rate target range by 25bp to 3.75%-4%, directly lifting the effective federal funds rate.

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